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Carson Block: We Have Not Changed Our Thesis on Olam

By: Bloomberg | Wednesday, February 20, 2013

Carson Block of Muddy Waters Research spoke today with Bloomberg Television's
Erik Schatzker and Sara Eisen on "Market Makers" about short selling, his investment
strategy, on plans to move to move to other emerging markets and his unchanging
thesis on Olam International.

Block said, on Olam: "Numbers are not that good if you scratch the surface"

Courtesy of Bloomberg Television

Block on whether Herbalife is doing a disservice to the business of short
selling:

"I do not think it is doing a disservice. Whether Pershing and Ackman are
right or wrong, they got up there and gave a three-hour presentation that was
chock full of data. Nobody can dispute whether they have done a significant
amount of research. Reasonable people, I guess, are arguing about the conclusions
they have drawn from the data on, but that alone says that when you're in this
business of short-selling, you really do your homework. And if you are not
prepared to do so, there's no place for you in this business."

On whether he is still sticking to his thesis on Olam:

"The short answer is yes. We have not changed our thesis on Olam. When they
reported, the numbers looked good but Q2 got this one time extraordinary gain,
then the net income declined 6.3% year-over-year. It was not a good quarter
at all from that perspective and from the cash earnings perspective, they burned
a lot more cash. The numbers are not that good if you scratch the surface."

On dealing in a foreign market:

"Dealing in a foreign market itself bears a lot of uncertainties. How the
regulators react or do not react makes things a lot more typical. One of the
interesting facets of this with Olam is that one of the largest outside shareholders
was in Singapore...ultimately, our view is that to Temasek, which is the Singapore
arm, will view this from favorable purposes. When it was doing it, I was doing
it for more than systemic purposes and Singapore. It is a strange mix."

On whether media attention ultimately is a good thing for companies like
Herbalife and Olam?

"I believe the investment community may pay dividends for the shorts when
it comes to. The FTC a few weeks ago released a list of complaints and one
might postulate that the reason it did so is because Herbalife was getting
so much attention in the investment community. It is reasonable to assume that
all of this uproar has drawn attention to Herbalife. Whether that brings adverse
affects to the company is a different question. As far as Olam goes, it is
already heavily shorted stock by the time we wrote on it. I do not know that
we have raised awareness among short sellers. Among long buyers and potential
long buyers, certainly, the press in Singapore, you know, Temasek being portrayed
on one side and us on the other, that brings attention to our original thesis."

On moving into other emerging markets:

"We have not precluded the emerging markets. Certainly, there are companies
we believe should not be trading. One of the issues with India, though, is
that as foreign investors, it is very difficult to short. It is a very squeegee
-- a very squeeze the market. I'm not saying we will not do it, but it does
require a lot of deliberation. We have looked at Japan. There are a lot of
problem companies in Japan. Japan is a possibility. But the U.S., what we see
here -- first, it is a market we are most familiar with. We see a lot of companies
that we think are problematic. I'm defining that in a broad sense by saying
that these are companies that we feel their primary purpose is to enrich management
by transferring wealth from investors to management. Some of those companies
are ones that we would like to expose and shows -- and show the market that
this is what they're doing.